Private exchanges are a complex tool in a complex market, but they continue to evolve as employers switch to them, and brokers learn to work with them. Panelists at the opening keynote for Employee Benefit Advisers Workplace Benefits Mania on Tuesday agreed that private exchanges are ever-changing. Every hard-and-fast rule that we saw four years ago is gone. You no longer have to be in defined contribution, you no longer have to be fully insured, said Carol Harnett, a benefits consultant and panel moderator at the Las Vegas conference. If there is something you dont like about private exchanges, it will change.
Private exchanges, explained Alan Cohen, co-founder and chief strategy officer at private exchange operator Liazon, change the way employee benefits have historically been offered. Now the employee makes the decisions about their health care a choice Cohen calls as personal as the car they drive and house they live in. The reality is that companies making the choice [for their employees] creates a lot of inefficiencies and high costs, he explained.
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The change to individual decision-making through exchanges has not happened in the past because the technology to empower consumers to make the right choices was not there, according to the panel. Now, with advanced technology and the Affordable Care Act as a catalyst, Cohen said, changes to come within the private exchange market include:
1. Compensating for Adverse Selection: Fully-insured exchanges need to come with risk adjustment, similar to the public exchanges, Cohen said. The way to survive over time is to offer high quality plans that avoid anti-selection. It settles risk on the backend and there has been functioning risk adjustment for decades, Cohen said. In our fully-insured [exchange] there is risk adjustment. Further, carriers learn how to compete with each other; any free market creates innovation and reduces costs, he added.
2. Networks: Expect to see a proliferation of narrowing of networks as they move from being price-driven to more health- and quality improvement-focused. That is an important catalyst moving forward, said David Beech, client executive and health care consultant at Barney & Barney, a Marsh company. Cohen said Liazon data show 80% of consumers on their exchange will consider a narrower network, and 48% choose one. Calling them low-cost, rather than narrow networks, Cohen said one he works with in New York City through Aetna has 6,000 providers, compared to Aetnas normal 15,000 in the Big Apple.
3. Education: Questions remain if private exchanges will reduce premiums but that is not the right question to be asking, Shan Fowler, director of marketplace at online benefits enrollment company Benefitfocus, said. Instead, exchange operators need to focus on educating consumers and providing support tools.
4. Wellness: For private exchanges to thrive they need to fill important functions, and that may include wellness initiatives. The operation of private exchanges, arguably [by] the insurance companies, are really going to change the game in terms of managing health, Beech said. Historically and still today, [we] rely heavily on the carriers to manage health. Is this going to be the watershed moment where employers back off? Or are carriers going to pick up the ball to have financial incentives through the exchange movement?
In the end, a private exchange is only as good as the products and services provided. Clients will always need advice and consul about which product to use, Beech said. For brokers, that will mean more an ongoing role in the system.
